What is a cooperative society?
A cooperative society is an organisation of people who have voluntarily come together for the purpose of solving their socio-economic problems through self-help initiatives, mutual support and investment ventures aimed at equally benefiting the group/members and their communities and or spheres of influence.
What are some of the cooperative societies in the world?
The most common types of cooperatives in the world are:
- Savings and credit cooperatives SACCOs also known as CREDIT UNIONS
- Housing cooperatives
- Consumer cooperatives
- Transport cooperatives
- Marketing cooperatives
- Horticulture cooperatives
- Handicraft cooperatives
- Industrial cooperatives
- Building and construction cooperatives
- Service cooperatives
- Multi-purpose cooperatives
What is a savings and credit cooperative (SACCO) or CREDIT UNION?
This is a cooperative whose objective is to pool savings for its members and in turn provide them with credit facilities. SACCOs also aim at encouraging thrift amongst their members and to guide them on prudent financial management and investment practices. SACCOs that succeed in building a critical mass of membership may also benefit from economies of scales arising from bulk purchases, common logistics, distribution, marketing and common markets among many other innovations.
SACCO is an abbreviation for Saving and Credit Cooperative.
SACCOs are user-owned financial institutions that offer both savings and credit services to their members. Members of these financial institutions can be both net savers and net borrowers.
In Zimbabwe’s legal framework, SACCOs are authorized to mobilize member savings and non-members savings.
- SACCO Society is financial cooperative society established by voluntary people based on the philosophy of building self-help society or “people helping people”.
- SACCO Society is owned, managed, controlled by members. Members have the right to decide on its issues, members have the right to benefit from its service.
- SACCO Society is formed initially for the poorer to provide financial services such as safe place for savings and providing easy accessible loans to members.
- SACCO Society is “not for profit or for charity” but serve members at fair profit margins.
- In SACCO Society members’ savings form a good pool of money, from which loans are made to members with fair lending interest and the interest rate is decided by members.
- In SACCO Society once overhead and other expenses are paid, reserve for cushion against any loss, and for expansion of services set aside, the remaining income from loans is returned back to members in the form of dividend on savings, share or both.
In general SACCO Society are financial institutions designed for people, to have their own efficient financial service giving institutions that empowers themselves in building asset by teaching thrift culture and make themselves accessible to credit in sustainable way.
What are the broader objectives and purposes of a SACCO?
Objectives of any SACCO Society are:
- Encouraging and promoting to develop thrift culture within the members as well as the community by teaching wise use of their money and efficient management of their limited resources.
- Teaching people how to create an asset that helps them to have a guarantee and collateral for future loan access.
- Making finance more accessible for members when they need it.
- Developing a linkage between the rural people and urban banks in order to have broader financial flows into the community and a safe haven for rural peoples’ savings
Purposes of a SACCO Society are:
Understanding the SACCO Society from a functional perspective allows you to see the logic in its operation. It allows you to define, with great precision, what the operation should do and what it should not do as organization. Further, it allows you to define what are the necessary inputs to produce the desired outputs.
The two fundamental function of a SACCO Society are financial intermediation and investment. The most basic function of SACCO Society is financial intermediation. That is bringing savers and borrowers together in a system that enables them to pool their money as savings and shares, and after capturing funds transforming into loans by calculating all of the costs of doing this business to make profitable/useful to both parties (the SACCO Society and its members).
Specifically the financial intermediation function of a SACCO Society is:
- Encouraging and promoting members to develop their thrift culture, as well as the community by teaching wise use of their money and efficient management of their limited resources,
- Teaching people how to create an asset that helps them to have a guarantee and collateral for future loan access,
- Make members more accessible for finance when they need it,
- Develop a linkage between the rural people and urban banks in order to have sustainable financial flow.
The other essential function of a SACCO Society is investment. That is to allow and encourage members to develop formal business and investment, (the SACCO Society itself) by placing their capital at risk and to receive a return (profit) on that investment.
Specifically the investment function of a SACCO Society is:
- Allow and encourage members to develop formal business and investment, facilitate them with sustainable loan services,
- Encourage members to buy shares in the appropriate amounts by leveraging with their savings at the appropriate times; using those shares guarantee the savings and loans of the members, by providing the correct amount of liquidity in the SACCO Society to manage risk of withdrawal or late repayment;
- Retaining some profit from interest earned on the lending operation to pay dividend to the members on the basis of the shares owned; redistribute the profits to the members as dividend on the basis of shares owned.
Therefore, to be successful and sustainable the SACCO Society should function similar to banks as a market for money in a group sharing a common bond. SACCO Society is a financial institution that purely deals with mobilizing money from members as savings, shares and providing easy accessible loans to members on time.
Since SACCO Society deals with cash (the most liquid asset) that can be easily lost, it needs high quality management and special attention to minimize the risk. Therefore, to minimize the risk the function of the SACCO Society should not be mixed with other functions.
What are the guiding principles of all cooperatives in general?
The pioneers of the Rochdale Cooperative Society formulated a code of cooperative ethics, referred as cooperative principles. These principles gave them strength and vision in time of darkness and exploitation. The International Cooperative Alliance (ICA) reviews these principles from time to time and adopted the revised principles which any genuine Cooperative Society must strictly adhere too and these are:
- Voluntary and open membership
- Democratic administration and members leadership
- Member Economic Participation: -Service and Surplus return to members
- Continuous education to members and leaders
- Autonomous and self help
- Cooperation among cooperatives
- Concern for the community
1st Principle: Voluntary and open membership
- Membership in a SACCO Societies should be voluntary and open to all persons able to use their services and willing to accept the responsibilities of membership stated by General Assembly of members without gender, social, racial, political or religious discrimination.
However, this freedom to join the SACCO Society is not of absolute, The General Assembly of the SACCO Society may stipulate some requirements, which must be fulfilled by a person who is willing to join the SACCO Society for instance:
- The question of age,
- The question of character
- The question of mental uprightness
- The question of loyalty
- The question of ability to save etc.
2nd Principle: Democratic Control, Administration and members’ leadership
- SACCO Societies are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions on issues of maximum loan amount and maximum Loan period to members, determining interest rate, determining election period, determining duration of elected Boards and committee, etc.
- Every member has equal voting rights, which is “One member One Vote Principle.” Accordingly one member has only one voting right, regardless of whether he/she has high or small amount of money in savings and shares.
- This equality gives the members the proper basis for democratic management of their resources within their SACCO.
- The members elect a Management Committee and other committees from among the members and even they have the right to drop out inefficient and unfaithful elected Board of Directors at any time.
- The highest responsibility for the individual members in developing democratic administration within their SACCO is attending the meeting which will held at monthly bases.
- This meeting helps members to have the opportunity to:
- Protect membership rights,
- Monitor if there is fair sharing of benefits or not,
- Assign tasks to further benefits to all,
- Build transparency among the members,
- To discuss problems together and identify solutions by themselves.
If members themselves do not do this, with no doubt the Board of Directors and elected committee will have the chance to misuse the SACCO resources.
Be careful SACCO is dealing with money the most liquid and attractive asset:
- “Remember money builds and destroys anything in this world.” Therefore, every member should watch carefully, either every resolutions passed by members are correctly implemented by Management Committees and Committees in a right way with no exploitation of the resource or not.
3rd Principle Member Economic Participation
Service to members
Members contribute equitably participation of share, savings and borrow loans, and democratically control the activity of the share, savings and loans.
The SACCO Societies should serve their members to improve their livelihood by giving safe place to save, teaching people how to generate income, how they can develop thrift culture, wise use of resources.
- SACCO Societies should be able to provide accessible loan to needy members based on the loan policy regulations and procedures for any productive purpose such as seed; fertilizer, plough purchases, other business etc.
Surplus return to member
- SACCO Societies are peoples owned financial institution; it grows not by transacting a commodity, rather profit is earned by attracting more savings and from which distributing sound loan accounts to members.
- It is true that the main objectives of the SACCO Societies are not to make aggressive profit, but it is also true that a well-organized and successful SACCO Society should end up with a balance of funds that enable it to protect members share and savings from any risk and allow expanding its financial services in the future.
- After the over head costs and other expenses are paid, reserves for loss, for expansion services are put aside the remaining Net profit from loan is return back to the members as dividend.
4th Principle: Continuous education, Training and Information to members and leaders
- Cooperation requires the acceptance of new ideas, new standards, new habits of thought and behaviours in its own interest and for its own survival. This should be supported by educating its members in appropriate way.
- Educating members by education committee enlightened members to understand their rights correctly, inspire them to fulfil their responsibilities as a member.
- Education encourages member participation on their SACCO issues. This member’s participation is a key for the success to their SACCO development.
5th Principle: Autonomous and self-help.
- SACCO Societies are autonomous and self-help financial organizations controlled and managed by members.
- If SACCO Societies enter into agreements to raise their capital from external sources, it should be with the full agreement and say of members.
- This Agreement should ensure that every activity of the SACCO democratically controlled by their members and maintain their autonomy.
6th Principle: Cooperation among SACCO Societies.
- SACCO Societies should cooperate among themselves in order to best serve the interests of their members and the community at local, regional, national and international levels
7th Principle: Concern for the community.
- SACCO societies should work for the sustainable development of their communities through the policies approved by their members. That is:
- Teaching the youth to develop their saving culture
- Investing in school, hospital furniture improvements etc., from the social reserve fund.
- Intermediating and managing community fund, such as revolving funds mobilised by SACCOs themselves.
Who is eligible to be a member of a cooperative society?
To join a cooperative society, you must fulfil the following conditions:
- Be 18 years and above
- Have a common bond with other members of the cooperative society
- Be of good character
- Be of sound mind
- Agree to abide by the Cooperative Societies Act, Rules and By-laws of respective cooperative society
NB: Parents and guardians may open accounts on behalf of their minor children, of which the minors would eventually takeover once they become a major by operation of the law.
Is it possible to lose your cooperative society membership?
Membership may be lost in the event of:
- Expulsion in accordance to your cooperative society’s by-laws
- Unsound mind
- Voluntary withdrawal or resignation from your cooperative society
- Collapse or dissolution of your cooperative society
What are some of the rights of cooperative society members?
As a member of a cooperative society, you are entitled to a number of rights, including the right to:
- Attend general meetings and vote
- Get a share of surplus income at the end of each year
- Inspect your society’s books of account
- Apply for loans, in the case of SACCOs
- Approve, reject or defer budget
- Participate in amending the society’s by-laws
- Fix borrowing powers of the society
What are the responsibilities of a cooperative society member?
Some of your responsibilities as a member are:
- Economic participation
- Attending members’ education days
- Adhering to your society’s by-laws
- Liability for your society’s debts incurred as a member.
- Encouraging potential members to join your society
Selling the society’s products (goods or services).
What is the structure of Cent Cent SACCO?
- The Supreme authority of the SACCO vests in the General Meeting/General Assembly
- Management Committee
- Management Sub-committees namely:
- Supervisory Committee – Reports to the General Assembly and Supervises and controls the management committee
- Technical Advisory Board – is made up of non-member technocrats who advises the Management Committee
Education and Training Committee
Business Development Committee
Operations and Logistics Committee
What are the duties of a management committee?
The management committee is the governing authority of a SACCO and is subject to any directives of a general meeting. It is advised by the Technical Advisory Board and is supervised by the Supervisory Committee. Among other responsibilities, the committee has a duty to:
- Adhere to the Cooperative Societies Act chapter 24:05, Rules and By-laws, General Assembly Resolutions and prudent business practices in all its activities and undertakings
- Determine the interest rates on loans, subject to the society’s by-laws
- Ensure the keeping of true and accurate records of account
- Recommend to the annual general meeting, the dividend rate to be paid on shares, and the interest and refund payable to borrowers
- Authorise investments by the society
What requirements must one fulfill to qualify for a cooperative loan?
The Loans committee must abide by the loans policy. Some of the requirements by the existing policy are:
- A society must have been in existence for at least 6 months (from the date of registration), for its members to qualify for cooperative loans
- You must have been a member of a cooperative society for at least 6 months to qualify for a loan
- Only members can qualify for a loan
- The society’s books of account must be up to date for its members to qualify for loans
Can I qualify for a loan based on one-off savings or contributions outside a check-off system?
A members Savings and contributions must remain in the society for at least 6 months for you qualify for a loan.
What if the demand for loans by members is more than the funds available for lending?
When demand for loans is more than the available funds, short-term loans will be given preference. However, at all times, smaller loans will always get a priority over larger ones.
What type of loans can I qualify for?
The main types of loan available to Cent Cent SACCO members are:
- Productive Loans/Normal Loans
- Micro-Leasing Finance
- Emergency Loan (EL)
- Life Cycle Loans (LCL)
- Education Loans
- Graduation Loans
- Wedding Loans
- Funeral Loans
Can you join a cooperative if you are unemployed or self-employed?
Yes, you can join a co-operative as long as your income allows you to save regularly. Saving regularly does not necessarily mean daily, weekly, monthly etc.
What are the maximum limits of the different loan types available in the SACCO and loan repayment periods?
Loans are given up to four times the amount of SACCO savings, while repayment period ranges from 4-36 months, depending on the availability of funds.
What is the major difference between Cent Cent SACCO and other SACCO in Zimbabwe?
Cent Cent SACCO has an open common bond, meaning open for all Zimbabweans. Other SACCOs limit their membership to those belonging to say same company/enterprise/institution, same profession of bound by a defined geographical area.
Why is Cent Cent SACCO choosing to be different from other SACCOs in Zimbabwe?
Cent Cent is following the template of oldest SACCOs in the world that have since grown to be International Banks bursting the boundaries of limiting common bonds that inhibit innovation and attainment of critical mass and heavy weight economies of scale.